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A recent study has proposed at least two measures to address the gnawing problems in Europe’s copyright levy system, which is being implemented differently in 22 countries in the region.

Titled “Private Copying and Fair Compensation: An empirical study of copyright levies in Europe,” it claims to be the first independent empirical assessment of Europe’s copyright levy system. It was written by a Bournemouth University professor, Martin Kretschmer, for the UK Intellectual Property Office. Kretschmer is director of the Centre for Intellectual Property & Management at the business school.

Copyright levy is a charge on blank CDs and other devices which can be used in storing illegal copies of copyrighted materials. The charge is traditionally passed on to consumers. Proceeds are paid into a fund that is managed by the country’s collecting society for the benefit of copyright owners.

“The levy system, as it is, is not working anywhere,” Kretschmer told Intellectual Property Watch after a presentation of his paper at the World Intellectual Property Organization on 15 February. “It’s very complicated.” The system of taxation is “cumbersome,” he said, and “very little ends up where it should.” [Note: the link to the event appears to have been removed from the WIPO website.] The seminar presentation is available here [pdf].

One of the measures proposed in the study is the avoidance of giving entitlement to compensation from what it called as “narrowly-conceived private copying activities” such as format shifting.

“Good public policy should incentivise right owners to make copyright materials available in a form that enables private copying, since there are obvious benefits to innovation and learning if users have as wide access as possible to cultural materials,” read the study.

At present, however, copyright holders who are giving permissions for private copying, through Creative Commons for instance, are not benefiting from the copyright levy system.

“Thus European policy, perversely, appears to incentivise right holders to apply restrictive settings which are then breached by users, allowing the right owners to claim harm that should be compensated,” added the study.

The study has also called for the adoption of state regulated licences for non-commercial activities. Examples of these non-commercial activities are user-generated content, mixing and mash-ups.

It argued that giving statutory licenses, in this case for non-commercial activities, does not go against the international copyright framework such as the Berne Convention – the treaty that sets the ground rules for copyright protection.

“Such a licence could include state regulated payments with levy characteristics as part of a wider overhaul of the copyright system, facilitating the growth of new digital services,” according to the study.

The recommendations took account the latest European Court of Justice decision on the Padawan case, in which the high court has ruled that the “fair compensation” concept in the EU Information Society Directive should be calculated on the basis of harm to copyright holders as a result of private copying. Private copying has been included as one of the closed list of exceptions allowed in the 2001 directive.

The Padawan decision has shed some light on the contradictory policy behind the copyright levy system. Private copying should not involve harm as it is copyright-exempted, thus no infringement. However, by slapping a charge on a device that can be used for illegal private copying, it assumes that the act of copying is an infringement to the owner’s exclusive rights.

The study was released amid calls to reform the copyright levy system in Europe. It reiterated the dramatic differences among countries in their implementation of the compensation scheme, particularly in the areas of identifying leviable devices, setting tariffs, and the beneficiaries.

Germany was the first country in Europe to ask for copyright levy when in 1964 its collecting society GEMA tried to make manufacturers of tape recorders record and disclose the identity cards of buyers which it could use later as basis for direct infringement actions.

The Information Society Directive, which was later transposed into the laws of EU member states, has made the copyright levy system mainstream in the region. Citing official figures, the study showed that total revenues from the 22 countries in the region reached a record high of €567 million euros in 2004, but has since then started to go down as commonly-charged devices such as blank tapes, CDs and DVDs start to disappear from the market.

William New contributed to this report.

Maricel Estavillo, an intern at Intellectual Property Watch, is an LL.M. in Intellectual Property and Competition Law Candidate at the Munich Intellectual Property Law Center (MIPLC). A former business journalist in Manila, Philippines, she is currently working on research on copyright in digital media for her Master’s thesis.